Expert Witness Says Disney Had Cause to Fire President

Published: October 22, 2004

The Walt Disney Company should have fired Michael S. Ovitz because of his ''substantial and repeated dishonesty,'' a legal specialist testified yesterday in support of the shareholders who are suing Disney's directors over Mr. Ovitz's $140 million severance package.

The shareholders are asking that the severance be returned to Disney with interest, a total of about $200 million. They say that Mr. Ovitz performed extremely poorly in his 14 months as president of Disney and that the directors simply rubber-stamped his exit deal. The trial, which opened Wednesday in Delaware Chancery Court, is being closely watched as a test of corporate responsibility.

''I concluded there was good and sufficient grounds for termination for cause under the contract,'' the specialist, John J. Donohue III, a law professor at Yale and an expert in labor and contract law, testified. ''As you look back at his behavior during his tenure at Disney, it did reflect a lack of understanding'' of his responsibilities, he said, adding that he based his opinion on records, case law and pretrial depositions.

''My opinion is that the documentary evidence buttressed by deposition testimony provide the basis for determining that there was substantial and repeated dishonesty on the part of Michael Ovitz during his tenure as president at Disney,'' Mr. Donohue said. He was the second of three expert witnesses that the shareholders plan to call.

The shareholders' claims stem from a 1995 deal that the Disney chief executive, Michael D. Eisner, struck to hire his friend, Mr. Ovitz, the founder of Creative Artists Agency. Records show that the board never met to discuss the deal before Disney announced it, shareholders say.

A spokesman for Mr. Ovitz said in a statement, ''The plaintiffs' expert based his unfounded opinion on nothing more than second- and third-hand hearsay and gossip.''

Mr. Ovitz could be called to testify by early next week. Mr. Eisner and most of the Disney directors are also expected to testify.